Qualcomm's push into the connected home

As SD tech giant brings Atheros into fold, it looks to take on Broadcom in Wi-Fi

It has been a year since Qualcomm spent $3.1 billion to acquire Wi-Fi/Bluetooth chip maker Atheros — announcing its intention to become a heavyweight in the fast-growing connectivity semiconductor market.

Yet in the past year, little has changed in the connectivity landscape, which involves semiconductors for Wi-Fi, Bluetooth, GPS, Near Field Communications, FM and other wireless technologies.

Irvine-based Broadcom remains the connectivity chip leader with strong market share in smartphones and tablets. It has 27 percent of the worldwide connectivity chip market, according to ABI Research.

Qualcomm-Atheros ranks second, thanks to its strength in GPS technology as well as Wi-Fi chips used in personal computers, routers and networks. It has 16 percent worldwide market share, says ABI Research.

But this status quo could shift as Qualcomm moves farther along in bringing Atheros into the fold, and both Qualcomm and Broadcom take aim at each other’s strongest businesses.

With the Atheros deal, Qualcomm is bulking up on Wi-Fi/Bluetooth and other connectivity technologies to complement its core strength in cellular baseband chips that link mobile phones and tablets to 3G and 4G wireless networks.

Meanwhile, Broadcom has hundreds of engineers working on its 4G cellular baseband chip offerings to complement its strength in Wi-Fi and Bluetooth connectivity semiconductors, said Craig Berger, an analyst with FBR Capital Markets.

“Broadcom is not coming from an area of strength in cellular baseband, where Qualcomm is the 800-pound gorilla,” said Berger. “But in combo connectivity, it’s pretty much the opposite. Broadcom is the 800-pound gorilla.”

Wi-Fi, Bluetooth, GPS and other connectivity chips are expected to grow from an $8 billion market in 2011 to close to $40 billion by 2016, says ABI Research.

That growth is centered on smartphones, tablets and connected home devices, said Stacy Rasgon, an analyst with Bernstein Research.

“We expect smartphones and the proliferation of connected devices such as notebooks, tablets, personal navigation devices, handheld game players, TVs and set-top boxes to be a major boost to connectivity sales going forward, and to Wi-Fi sales in particular,” he said.

Cellular carriers once viewed Wi-Fi as a threat. Now they are looking at it as a way to offload traffic from their congested cellular networks, say analysts. So almost every smartphone today supports Wi-Fi, up from 50 percent of smartphones three or four years ago, said Rasgon.

Tablets also are a big Wi-Fi market. “Almost all tablets are coming out with Wi-Fi now, and very few of them are sold with cellular capability,” said Will Strauss, president of industry research firm Forward Concepts. “People are finding they simply can’t afford to be connected to the cellular network and download” big files.

The connected home, where TVs, Blu-ray players, game consoles and other devices have embedded wireless connectivity, isn’t big yet. But it’s expected to expand fast.

“When we looked at this in 2011, total penetration of Wi-Fi into the connected home was maybe 5 percent,” said Rasgon of Bernstein Research. “So these connected home devices represent a significant opportunity for Wi-Fi growth.”